FC: Hewlett-Packard says it will buy Compaq in $25 billion deal

From: Declan McCullagh (declanat_private)
Date: Tue Sep 04 2001 - 07:26:54 PDT

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    New York Times coverage:
    http://www.nytimes.com/2001/09/04/business/04DEAL.html
    
    Press release follows.
    
    -Declan
    
    ********
    
    http://www.hp.com/hpinfo/newsroom/press/04sep01a.htm
    Message-Id: <20010904141030.1E0811050Cat_private>
    
    HEWLETT-PACKARD AND COMPAQ AGREE TO MERGE, CREATING $87 BILLION GLOBAL
    TECHNOLOGY LEADER
    
        PALO ALTO, CA and HOUSTON, TX, September 3, 2001
          _________________________________________________________________
    
        Hewlett-Packard Company (NYSE: HWP) and Compaq Computer Corporation
        (NYSE: CPQ) announced today a definitive merger agreement to create an
        $87 billion global technology leader. The new HP will offer the
        industry's most complete set of IT products and services for both
        businesses and consumers, with a commitment to serving customers with
        open systems and architectures. The combined company will have #1
        worldwide revenue positions in servers, access devices (PCs and
        hand-helds) and imaging and printing, as well as leading revenue
        positions in IT services, storage and management software.
    
        The merger is expected to generate cost synergies reaching
        approximately $2.5 billion annually and drive a significantly improved
        cost structure. Based on both companies' last four reported fiscal
        quarters, the new HP would have approximate pro forma assets of $56.4
        billion, annual revenues of $87.4 billion and annual operating
        earnings of $3.9 billion. It would also have operations in more than
        160 countries and over 145,000 employees.
    
        Carly Fiorina, chairman and chief executive officer of HP, will be
        chairman and CEO of the new HP. Michael Capellas, chairman and chief
        executive officer of Compaq, will be president. Capellas and four
        other members of Compaq's current Board of Directors will join HP's
        Board upon closing.
    
        "This is a decisive move that accelerates our strategy and positions
        us to win by offering even greater value to our customers and
        partners," said Fiorina. "In addition to the clear strategic benefits
        of combining two highly complementary organizations and product
        families, we can create substantial shareowner value through
        significant cost structure improvements and access to new growth
        opportunities. At a particularly challenging time for the IT industry,
        this combination vaults us into a leadership role with customers and
        partners -- together we will shape the industry for years to come."
    
        Capellas said, "We are creating a new kind of industry leader -- one
        founded on customer success, world-class engineering, and best of
        breed products and services. In sharp contrast to our competitors, we
        are committed to leading the industry to open, market-unifying
        architectures and interoperability, which reduce complexity and cost
        for our customers. With this move, we will change the basis of
        competition in the industry."
    
        Under the terms of the agreement, unanimously approved by both Boards
        of Directors, Compaq shareowners will receive 0.6325 of a newly issued
        HP share for each share of Compaq, giving the merger a current value
        of approximately $25 billion. HP shareowners will own approximately
        64% and Compaq shareowners 36% of the merged company. The transaction,
        which is expected to be tax-free to shareowners of both companies for
        U.S. federal income tax purposes, will be accounted for as a purchase.
    
        The transaction is expected to be substantially accretive to HP's pro
        forma earnings per share in the first full year of combined operations
        based on achieving planned cost synergies. Cost synergies of
        approximately $2.0 billion are expected in fiscal 2003, the first full
        year of combined operations. Fully realized synergies are expected to
        reach a run rate of approximately $2.5 billion by mid-fiscal 2004.
        These anticipated synergies result from product rationalization;
        efficiencies in administration, procurement, manufacturing and
        marketing; and savings from improved direct distribution of PCs and
        servers. Subject to regulatory and shareowner approvals and customary
        closing conditions, the transaction is expected to close in the first
        half of 2002. In connection with the transaction, both companies have
        adopted shareowner rights plans; information on these plans will be
        filed today with the Securities and Exchange Commission.
    
        The merged entity will be headquartered in Palo Alto and retain a
        significant presence in Houston, which will be a key strategic center
        of engineering excellence and product development.
    
        The new HP will be structured around four operating units that build
        on the companies' similar go-to-market and product development
        structures to provide clear customer and competitive focus. Leadership
        and estimated revenues (calculated by combining the two companies'
        trailing four reported fiscal quarters) are as follows:
    
          * A $20 billion Imaging and Printing franchise to be led by Vyomesh
            Joshi, currently president, Imaging and Printing Systems, of HP.
          * A $29 billion Access Devices business to be led by Duane Zitzner,
            currently president, Computing Systems, of HP.
          * A $23 billion IT Infrastructure business, encompassing servers,
            storage and software, to be led by Peter Blackmore, currently
            executive vice president, Sales and Services, of Compaq.
          * A $15 billion Services business with approximately 65,000
            employees in consulting, support and outsourcing to be led by Ann
            Livermore, currently president, HP Services.
    
        The chief financial officer of the combined entity will be Robert
        Wayman, chief financial officer of HP. The integration team will be
        led by Webb McKinney, currently president of HP's Business Customer
        Organization, and Jeff Clarke, chief financial officer of Compaq.
    
        Fiorina concluded, "Clearly, the potential of this combination is
        compelling, but we understand the magnitude of the challenge and the
        need for discipline and speed. We're helped by the fact that both
        companies have been pursuing similar organizational structures and
        sales force models, and there is immense talent resident in both
        organizations. We have done comprehensive integration planning and
        have clear metrics to drive our success. We are committed to achieving
        the synergies we have identified while maintaining our competitive
        position and momentum in the marketplace."
    
        Investment Community and Media Event Information
    
        The companies will host a meeting for the investment community
        Tuesday, Sept. 4, at 9 a.m. EDT at the Equitable Building in New York
        City, 787 Seventh Avenue (between 51st & 52nd streets) in the
        Auditorium, Lower Level. Those unable to attend may listen by calling
        (888) 849-9184 (US) or (212) 896-6074 (international), using
        reservation number: 19649821. The event can also be accessed via
        audiocast at www.hp.com or www.compaq.com. The slides used for this
        presentation will be available on each company's website 10 minutes
        prior to the start of the event. A replay will be available for 14
        days following the meeting at (800) 633-8284 (US) or (858) 812-6440
        (international), using reservation number: 19649821. There will also
        be a question and answer session for the media at 10:30 a.m. EDT
        following the analyst meeting, also in the Equitable Auditorium. Those
        unable to attend may participate by calling (888) 754-3420 (US) or
        (212) 676-5416 (international), using reservation number: 19650338.
        The event can also be accessed via audiocast at www.hp.com or
        www.compaq.com. A replay will be available for 14 days following the
        meeting at (800) 633-8284 (US) or (858) 812-6440 (international),
        using reservation number: 19650338.
    
        Fact Sheet
    
        A fact sheet related to the merger is attached to this press release.
    
        Calculation of Combined Revenues
    
        The statements of combined revenues in this release and the attached
        fact sheet are estimates and have been calculated by adding similar
        category information from the companies' separate filings with the
        Securities Exchange Commission for each of their past four fiscal
        quarters. Because the companies have different fiscal year-ends, these
        estimates do not track a matching time period. The measurement method
        described above may result in amounts that differ from amounts
        resulting from other methodologies the companies may use in the
        future.
    
        About HP
    
        Hewlett-Packard Company -- a leading global provider of computing and
        imaging solutions and services -- is focused on making technology and
        its benefits accessible to all. HP had total revenue from continuing
        operations of $48.8 billion in its 2000 fiscal year. Information about
        HP and its products can be found on the World Wide Web at www.hp.com.
    
        About Compaq
    
        Compaq Computer Corporation is a leading global provider of enterprise
        technology and solutions. Compaq designs, develops, manufactures and
        markets hardware, software, solutions and services, including
        industry-leading enterprise storage and computing solutions,
        fault-tolerant business-critical solutions, communication products,
        and desktop and portable personal computers that are sold in more than
        200 countries. Information on Compaq and its products and services is
        available at www.compaq.com.
    
        Additional Information and Where to Find It
    
        HP intends to file a registration statement on Form S-4 in connection
        with the transaction, and HP and Compaq intend to mail a joint proxy
        statement/prospectus to their respective stockholders in connection
        with the transaction. Investors and security holders of HP and Compaq
        are urged to read the joint proxy statement/prospectus when it becomes
        available because it will contain important information about HP,
        Compaq and the transaction. Investors and security holders may obtain
        a free copy of the joint proxy statement/prospectus (when it is
        available) at the SEC's web site at www.sec.gov. A free copy of the
        joint proxy statement/prospectus may also be obtained from HP or
        Compaq. HP and its executive officers and directors may be deemed to
        be participants in the solicitation of proxies from the stockholders
        of HP and Compaq in favor of the transaction. Information regarding
        the interests of HP's officers and directors in the transaction will
        be included in the joint proxy statement/prospectus. Compaq and its
        executive officers and directors may be deemed to be participants in
        the solicitation of proxies from the stockholders of HP and Compaq in
        favor of the transaction. Information regarding the interests of
        Compaq's officers and directors in the transaction will be included in
        the joint proxy statement/prospectus. In addition to the registration
        statement on form S-4 to be filed by HP in connection with the
        transaction, and the joint proxy statement/prospectus to be mailed to
        the stockholders of HP and Compaq in connection with the transaction,
        each of HP and Compaq file annual, quarterly and special reports,
        proxy and information statements, and other information with the SEC.
        Investors may read and copy any of these reports, statements and other
        information at the SEC's public reference rooms located at 450 5th
        Street, N.W., Washington, D.C., 20549, or any of the SEC's other
        public reference rooms located in New York and Chicago. Investors
        should call the SEC at 1-800-SEC-0330 for further information on these
        public reference rooms. The reports, statements and other information
        filed by HP and Compaq with the SEC are also available for free at the
        SEC's web site at www.sec.gov. A free copy of these reports,
        statements and other information may also be obtained from HP or
        Compaq.
    
    HP/COMPAQ FACT SHEET
    
        Transaction Summary:
    
        Structure: Stock-for-stock merger
        Exchange Ratio: 0.6325 of an HP share per Compaq share
        Current Value: Approximately $25 billion
        Ownership: HP shareholders 64%; Compaq shareholders 36%
        Accounting: Purchase
        Expected Closing: First half of 2002
    
        Overview:
    
          * Creates an $87 billion global technology leader, with the
            industry's most complete set of IT products and services for both
            businesses and consumers.
          * New HP would be the #1 global player in servers, imaging &
            printing, and access devices (PCs & hand-helds), as well as Top 3
            player in IT services, storage and management software.
          * The combination furthers each company's commitment to open,
            market-unifying systems and architectures and aggressive direct
            and channel distribution models.
          * Combined company can create substantial shareowner value through
            significant cost structure improvements and access to new growth
            opportunities.
          * Transaction expected to be substantially accretive to pro forma
            EPS in first full year of combined operations.
          * The merger is expected to generate cost synergies of approximately
            $2.0 billion in fiscal 2003, the first full year of operations;
            fully realized synergies are expected to reach a run rate of
            approximately $2.5 billion by mid-fiscal 2004.
          * New HP would have operations in more than 160 countries and over
            145,000 employees.
    
        Key Facts
        (last 4 qtrs): HP Compaq Pro Forma Combined
        Total
        Revenues $47.0 billion $40.4 billion $87.4 billion
        Assets $32.4 billion $23.9 billion $56.4 billion
        Operating
        Earnings $2.1 billion $1.9 billion $3.9 billion
    
        Leadership:
    
          * Board of Directors: 5 Compaq directors to join HP Board
          * Chairman and Chief Executive Officer: Carly Fiorina
          * President: Michael Capellas
          * Chief Financial Officer: Robert Wayman
          * Imaging & Printing: Vyomesh Joshi
          * Access Devices: Duane Zitzner
          * IT Infrastructure: Peter Blackmore
          * Services: Ann Livermore
          _________________________________________________________________
    
    
    
    
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